Companies across the EU are increasingly required to report their carbon emissions as part of their environmental transparency obligations. Among the three types of greenhouse gas emissions defined by the GHG Protocol, Scope 2 emissions—those resulting from purchased electricity, heat, steam, or cooling—can be particularly significant and complex to manage.
With new legislation like the Corporate Sustainability Reporting Directive (CSRD) in the EU and the Streamlined Energy and Carbon Reporting (SECR) framework in the UK, companies need to fully understand how to measure, report, and reduce their Scope 2 emissions. These emissions often account for a large proportion of an organisation’s carbon footprint, especially for office buildings, production facilities, and data centres.
This guide provides a practical, detailed breakdown of everything you need to know about Scope 2 emissions—what they are, how to measure them using both location-based and market-based methods, how to comply with EU and UK regulations, and how to set effective reduction strategies. We’ll also share real-life examples and emerging best practices from companies operating across Europe.
Understanding Scope 2 Emissions
What are Scope 2 Emissions?
Scope 2 emissions refer to indirect greenhouse gas (GHG) emissions from the generation of purchased energy. This includes electricity, heat, steam, and cooling that your company uses but doesn’t produce on-site. While your organisation doesn’t generate these emissions directly, you’re still responsible for them because they occur as a result of your consumption.
How They Differ from Scope 1 and 3
- Scope 1 covers direct emissions from owned or controlled sources (e.g. company vehicles, fuel combustion).
- Scope 2 involves indirect emissions from purchased energy.
- Scope 3 includes all other indirect emissions, such as supply chain activities, employee commuting, and product use.
Understanding Scope 2 is crucial because it sits at the intersection of your company’s operational control and the wider electricity market. It’s also typically easier to measure than Scope 3 and can be influenced through procurement choices.
Why Scope 2 Matters for EU Businesses
In the EU, energy consumption varies widely across sectors, and Scope 2 can form a significant portion of your total carbon footprint—especially in energy-intensive sectors such as manufacturing, tech, and retail. It’s also an area where real, reportable progress can be made through procurement strategies like power purchase agreements (PPAs), renewable energy certificates (RECs), and on-site renewable installations.
EU Regulatory Framework & Reporting Requirements
CSRD: A New Standard for Transparency
Under the Corporate Sustainability Reporting Directive (CSRD), which replaces the Non-Financial Reporting Directive (NFRD), large and listed companies in the EU are required to report their Scope 1, 2, and 3 emissions using the European Sustainability Reporting Standards (ESRS). The ESRS E1 standard sets clear expectations for Scope 2 disclosure using both location-based and market-based methods.
Key CSRD thresholds:
- 250+ employees
- €40M+ turnover
- €20M+ balance sheet total
SECR in the UK
In the UK, the Streamlined Energy and Carbon Reporting (SECR) framework applies to large companies and LLPs. It mandates reporting of:
- Scope 1 and Scope 2 emissions
- Energy use (in kWh)
- Methodologies and emission factors
SECR encourages transparency and comparability across industries and is enforced through Companies House filings.
National-Level Requirements
Some countries have national guidelines or tools to support Scope 2 reporting:
- France: ADEME provides emission factors and guidance.
- Netherlands: The RVO publishes tools aligned with GHG Protocol.
- Germany: The UBA (Umweltbundesamt) supports emissions calculation
Measurement Methods: Dual Reporting
Location-Based Method
This approach uses average emission factors for the geographical grid where the energy is consumed. For example, electricity consumed in Belgium would use Belgium’s average grid emission factor (available via EEA or national databases).
Pros:
- Simple to apply
- Good for baseline comparisons
Cons:
- Doesn’t reflect efforts to purchase renewable energy
Market-Based Method
This method calculates emissions based on supplier-specific emission factors or contractual instruments (e.g. green tariffs, PPAs, renewable certificates).
Pros:
- More precise
- Rewards clean energy procurement
Cons:
- Requires verification of instruments against the Scope 2 Quality Criteria
Scope 2 Quality Criteria
For contractual instruments to be valid in market-based accounting, they must meet the GHG Protocol’s quality requirements:
- Proper tracking and attribute claim
- Exclusive ownership
- Geographic and temporal matching
- No double counting
Many companies in France and the Netherlands rely on Guarantees of Origin (GOs), the EU’s standard energy tracking certificate.
Accounting & Boundary Setting
Organisational and Operational Boundaries
Before calculating emissions, businesses must define:
- Organisational boundary: Which entities to include (based on control or equity share)
- Operational boundary: Which facilities or operations within those entities use energy
Emissions from Heat, Steam, Cooling
Not all energy purchases are electricity. Purchased steam or district heating (common in Germany and the Netherlands) must be included in Scope 2 as well.
Avoiding Double Counting
Be cautious to avoid double counting energy emissions as both Scope 1 and 2 (e.g. if you generate and buy electricity)
Calculating Scope 2 Emissions
Collecting Energy Data
Gather:
- Electricity bills or smart-meter data (kWh or MWh)
- Consumption data for heating/cooling
- Separate data by facility, subsidiary, or country
Choosing Emission Factors
- Location-based: Use EEA or country-specific factors (e.g. ADEME for France, DEFRA for UK)
- Market-based: Use supplier-provided factors or contractual instrument documentation
Setting Reduction Targets & Strategy
Establish a Baseline Year
Choose a recent, representative year with complete data. Adjust for:
- Structural changes
- Acquisitions/disposals
- Emission factor updates
Define Target Types
- Absolute: e.g. “Reduce Scope 2 emissions by 40% by 2030”
- Intensity-based: e.g. “Reduce emissions per employee by 20%”
Ensure alignment with Science-Based Targets initiative (SBTi) where possible.
Procurement Levers
- Power Purchase Agreements (PPAs): Long-term contracts for renewable electricity.
- Renewable Energy Certificates: Guarantees of Origin in the EU or RECs in the UK.
- On-site renewables: Solar PV, biomass heat, etc.
- Energy efficiency upgrades
Belgian retailers like Colruyt and French tech companies have used PPAs to lower market-based Scope 2 emissions.
Reporting & Disclosure Best Practices
- Present dual totals side by side: market- vs location-based
- Show contractual instruments used (volume, country, expiry)
- Include methodology section: emission factors, tools, boundary rules
- Share year-on-year comparisons and highlight drivers of change
- Use dashboards or data platforms to engage investors and staff
Quick Takeaways
- Scope 2 emissions come from purchased electricity and heat, and must be reported under EU CSRD and UK SECR.
- Dual reporting using location- and market-based methods is required.
- Use national emission factors and Quality Criteria-compliant contracts.
- Reduction strategies include PPAs, RECs, and on-site generation.
- Start meters and digital platforms improve accuracy and cut admin costs.
- Transparent Scope 2 reporting builds trust and enables action.
Conclusion
Scope 2 emissions are a vital part of any credible carbon reporting strategy in Europe. For companies operating in Belgium, France, the Netherlands, Luxembourg, the UK, or Germany, understanding and complying with frameworks like CSRD and SECR is non-negotiable.
But Scope 2 reporting is more than a compliance task—it’s an opportunity to take control of your energy impact, drive procurement innovation, and contribute to a cleaner European grid. By setting robust reduction targets, using accurate data, and communicating transparently with stakeholders, your company positions itself not just as compliant—but as a climate leader.
Now’s the time to act: review your energy contracts, assess your baseline, and explore tools or platforms that streamline dual reporting. Your Scope 2 story can become a powerful chapter in your sustainability journey.
Tapio is a carbon management software that allows companies and consultants to calculate and reduce carbon emissions.
FAQs
1. What are Scope 2 emissions under CSRD?
They’re emissions from purchased electricity, steam, heating, or cooling, and must be reported using both location-based and market-based methods under the ESRS E1 standard.
2. How do I calculate location-based Scope 2 emissions?
Multiply electricity usage (in kWh) by the country-specific average grid emission factor (e.g. from ADEME or DEFRA).
3. What are Guarantees of Origin (GOs)?
GOs are European certificates proving the renewable origin of purchased energy, used in market-based Scope 2 reporting.
4. Can smart meters help with Scope 2 reporting?
Yes, they provide real-time consumption data, improving accuracy and easing calculation processes.
5. Is Scope 2 reduction required or voluntary?
Reporting is mandatory, but setting and achieving reduction targets is currently voluntary—though highly encouraged.